This post is courtesy of my Type-A-Mom Conference sponsor BJ Weber from Ankeny Tax and Accounting.  BJ is happy to answer questions and can be reached through his contact page.

Did I get your attention? Good. Although, my intention wasn’t to scare you, the above statement is becoming closer to reality than you might think.  “Why is the IRS watching me?”  “What do they want from a stay at home mom?”  “Am I doing something wrong?”  These are fair questions to ask. Give me a few minutes of your time and I will explain below.

First of all, if you are reading this I say congratulations. Due to the overwhelming surge of bloggers and specifically “mommy bloggers” you have garnered much attention. Some of this success has included: notoriety, fame and for some fortune. Unfortunately, some of the attention has also been unwanted in the form of waking up the “sleeping dog” of the IRS.

Until recently, blogging was just seen as something people did as a form of entertainment or socialization. An opportunity to “speak your mind” with the world as an audience. All of this is harmless of course in the eyes of the IRS until it becomes something more. The day you decide to allow advertising on your website or decide to write a review of a product that you received from a company is the day the IRS wants you.

According to the IRS, if you receive anything (product, sponsorship, etc.) in exchange for a service (review, space on your website, handing out information at conferences, etc.) you must include in your income the fair market value of property or services you receive. Now to some, that may seem harmless enough. However, because you will have to report that income on Schedule C, you will also be responsible for self employment tax in addition to any tax on profits.

Now, this fun little blog you did in between kids’ nap times has become a taxable event. “What am I supposed to do about this?” you ask. The answer depends on what your intentions are with the blog. If the income that you receive is minimal, perhaps simply tracking the fair market value of these items and claiming them at the end of the year is enough. If, however, your intentions are to utilize this opportunity to make some extra cash or to get a lot of things from companies, you will want to consider creating a corporate structure (LLC, S-Corp, C-Corp) to help lower your tax consequences. (A discussion regarding which corporate structure to use goes beyond the scope of this article. If you have questions, feel free to contact me and I will be more than happy to help.)

Whichever way you decide to handle your blog and the reporting of your new found income please be aware that the spotlight is now on you and your industry. Do not allow yourself to think that this doesn’t apply to you. At the very least, speak with a tax person to review your situation before deciding what the best path is.

If you have already or are thinking about creating a corporate structure you will want to read my follow up article regarding the IRS Code 183: Activities Not Engaged in For Profit. In this article I will be discussing what the IRS looks for in deciding if your business is or is not operating for profit. This is a critical subject because many of the audits that disallow certain expenses or write-offs come from individuals who didn’t know about the nine factors the IRS uses. Stay tuned.